This week in China: Operation sunshine; Kozy with Beijing

Baidu, that merry behemoth of internet advertising, threw a much-needed spark into the stock market this week, with an announcement that its revenues had jumped 85% annually in the third quarter — just further proof that “Don’t be evil” wasn’t a very realistic mission statement for an internet company in China. (For those of you who may be wondering about the potential damage to Baidu’s business from the current crackdown on the media, no fear: The company will be policing its content with the likes of “Operation Sunshine.” “Under the banner of Operation Sunshine, Baidu has forced alliances its major stakeholders including government ministries and HSD industry associations and the media,” Robin Li told investors during the conference call last year. Really – we don’t make everything up.) But just as positive earnings results were restoring confidence in the mainland came the news that half of China’s super-rich (defined as those with more than US$1.57 million in assets) were considering emigration. The survey, which was conducted by the Hurun Report and Bank of China, showed that many of those who emigrate do so by making a substantial investment in the host country. (It’s unclear how exactly the super-rich will transfer their money abroad; our efforts have often been thwarted by China’s financial regulators who, evidently seeking to prevent capital flight, have craftily hidden the Western Union in the Agricultural Bank of China, the red-headed stepchild of the Big Four banks.) But money will find a way; there is a limit to which one can invest in golden Audis, Lafite Rothschild, and capsules of powdered animal bones. Meanwhile, the property market, the other traditional recipient of Chinese investment, seems to be on the verge of um, something. More on that after we finish flipping these houses.

Kozy with Beijing

Media reports have been all a-flurry with speculation of the content of Nicolas Sarkozy’s call to Beijing late last week. Taking a page from Mr. Murdoch, CER was able to obtain a portion of the conversation. “Monsieur Hu, you ask too much,” Sarkozy muttered into the receiver. The French leader had already promised his counterpart that the eurozone would tighten its belt and consider easing its stance on China as a market economy – but letting Hu Jintao blackmail him into attending this week’s G20 summit in his pajamas? That crossed the line, said people who spoke on condition of anonymity. “Ze people of France would never let him live it down,” said the people. In exchange for the concessions, Hu super-double-pinky-swore (the tough-minded Sarkoz scoffs at the single) that maybe he was feeling good about it when the time came and had a good breakfast that day, that Beijing would consider helping bail Europe out. But it’s probably too soon to say; he is, after all, fickle about his breakfast.

And why shouldn’t China keep them guessing, some say, when even the slightest indication that it might help Europe is enough to spur a rally of stock markets? But that image of China as savior is contested; it differed wildly from Patrick Chovanec’s assessment this week of China as Wile E Coyote, with only a matter of time before it looks down and realizes it has already run off a cliff. The Tsinghua University professor argues that China had better seal the eurozone deal quickly to keep its mid-air sprint going or else risk a sharp drop as demand falls in Europe for Chinese-made tchotchkes. For media watchers everywhere tiring of this “maybe, maybe not” story, perhaps there is a better metaphor: If China keeps waffling, it will begin looking less like Europe’s shining knight and more like a hard-bargaining tow truck driver – willing to help for a diplomatic dime, or else leaving Europe on the side of the road with no rescue in sight.

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China Economic Review (CER) has been a dependably independent voice on trends and developments in the greater Chinese economy for a quarter century. Our coverage has won recognition from the Society of Publishers in Asia and is widely read by economists, business leaders, academics and students with an interest in one of the world’s most vibrant and complex developing markets.